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seaforth1

2,647 Posts.

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21/08/17

17:48

Post #: 26641566
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Originally posted by Vector ↑

First of all. Congrats to all holders and people who bought in early. This has had a big run up and people who were in should have made good profits on this.

Few things worth keeping in mind:

1) Metalurgical recoveries recently announced are based on indicated resource drilling. The majority of the depoisit is still in the inferred resource which could be oxidised - this is a reasonable assumption since these are tailings from mining over the last 30 odd years. The larger proportion of the tailings that are oxidised, the lower the recovery. This would have a huge impact on the feasibility/economics of at least the talings project. This is highlighted as one of the key risks in the prospectus (section 7.1 page 119 of the prospectus). I will be waiting to see the results of the Feasbility Study which is planned prove up the inferred into indicated resources and undertake more metalurgical test work.

2) Environmental Bonds: MMG's bank guarantees for the bonds will only run till 2026 by which time it must be replaced completely by NCZ (40% of any EBIT will be put towards this process). This also depends on the Department of Environment in Queensland agreeing to the revised plan by NCZ.
Also the department could request NCZ to increase the size of the bond which NCZ would have to come up with via cap raising or other means (pg 15 of the prospectus).

3) Issues with Native Title Groups: If you refer to section 4.2 d) of the prospectus, it mentions that there have been issues with GADC and renegotiation of the GDC. It seems that there are ongoing issues with the native title groups which will need to be resolved before operations can resume. It is not clear what the plan will be going forward to resolve this issue. Other Native title issues may also present themselves if mining resumes.

4) It seems like an interesting time to acquire the project - the Zn price was already reasonably high earlier this year. If the project was as clearcut as indicated I would have expected a larger player (like Glencore, S32 etc) to take over the project given that MMG must have run a competitive process on the project and a larger player would have had deeper pockets.

That said, it could still tick all these boxes but for where the project is at at the moment I think the market has probably gotten ahead of itself and there are still key risks so it is a wait and see on my side.

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good luck to those that killed it on the multiples

I had also heard a lot of the resource is within very important/sensitive aboriginal lands

NCZ Price at posting: 81.0¢ Sentiment: Hold Disclosure: Not Held
1 Upvote

0 Great analysis

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